Charging up the EV market
State support for electric vehicle production has grown, but price and charging stations still hamper development.
The government is offering full support to electrical vehicle (EV) manufacturers, including a series of excise tax cuts and promotional privileges that have attracted car assemblers to invest in the sector as a means to prop up sales of the eco-friendly vehicles. But there are hiccups that could potentially thwart the government's EV vision as high pricing and job losses come into play.
The government still has a long way to go to build up EV demand, say several analysts.
Commercial EVs are expected to be launched in the Thai market by 2025, say various Japanese organisations.
Price is first when it comes to mainstream acceptance. As with most other mass market products, an affordable price is a precondition for the widespread adoption of EV.
The government has announced tax-cutting measures, which have the capacity to reduce prices for consumers, but industry insiders are unimpressed. Industry officials say that EVs will constitute only 1% of passenger cars in Thailand in the near future, given their high price tags, effectively putting them out of reach for regular consumers.
Practicality comes second. While regulators recently gave the green light to energy firms looking to develop EV-related facilities including charging stations, they have not come up with an official estimate of the number of stations that will be in operation over the next few years, a key point to consider for anyone looking to buy one of these eco-friendly vehicles.
And broader policy considerations rank third. The arrival of full electric vehicles (FEV) will, in the short term, result in massive layoffs in local auto parts producers, which need time and capital to adjust themselves to produce EV parts. Electric car motors use half a dozen parts, compared with hundreds of parts for internal combustion engines (ICEs). Moreover, up to 70% of parts used in EVs differ significantly from parts used in oil-fuelled counterparts.
EV production appears to be gaining traction as government support enables carmakers to move forward with their business plans in this segment. Private energy firms can also start developing charging stations that will help with the commercial launch of EVs in the near future.
There are four platforms of EV available globally. Hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) were first developed with two systems, electricity/petrol and electricity/diesel. Battery electric vehicles (BEVs) were later developed, which are fuelled purely by electricity, with fuel-cell electric vehicles (FCVs) representing the latest EV technology.
HEVs came to the Thai market for the first time in 2009-10. There have been three HEV models locally assembled in the country: Toyota Camry, Honda Accord and Nissan X-Trail.
Mercedes-Benz used to assembly its BlueTec hybrid technology engines in Thailand from 2013 before upgrading to the PHEV platform from 2016. The automaker now produces four EV models total.
Its German peer BMW has also localised its PHEV assembly in Thailand since 2016.
Yossapong Laoonual, president of the Electric Vehicle Association of Thailand, said although EVs are being produced at a mass market level, their price will still be above 1 million baht, meaning only high-end motorists can afford them.
Mr Yossapong said most motorists drive cars powered by engines sized around 1,500cc, normally spending 600,000-800,000 baht for their vehicles.
"It will be hard to have more EV drivers in the near future if buyers still think the cost is too high to afford," he said.
The Land Transport Department reported the number of registered HEVs and PHEVs is 84,236 units as of June, while only 63 units were BEVs. This reflects the minuscule popularity of EVs in Thailand.
"It's a task for the Thai government and car manufacturers to seek ways to develop the local market in response to the trend of electrified mobility in the global automotive industry," said Mr Yossapong.
MORE SUBSIDIES NEEDED
He suggested the government narrow the price gap between petrol-fuelled cars and EVs to make the latter more affordable.
"The government should issue some subsidy to make prices of EVs more attractive," said Mr Yossapong, voicing a similar concern as other PHEV users.
Kunat Tharasrisuthi, a senior analyst at research firm LMC Automotive, said it had yet to see any dominant EV subsidy given to Thai buyers.
Other governments offer extensive cash rebates or tax discounts for EV buyers, he said.
"Consumers in Thailand have only seen an excise tax reduction and it is uncertain how attractive future EV prices will be," said Mr Kunat. It is hard to forecast interest in EVs should the Thai government issue promotional privileges," he said.
"It will take two or three years to see how many manufacturers will join the EV scheme, which models will be launched and how much Thai motorists will take to these vehicles," said Mr Kunat.
The EV price subsidy in China starts from 10,000 yuan (50,500 baht) per vehicle for various EV types, according to LMC's research.
The South Korean government offers a tax break worth 3.1 million won (90,500 baht) for HEVs and PHEVs and 4.85 million won for BEVs, with a subsidy between 1-14 million won from the central government.
The US used to offer a tax credit of US$2,500 to $7,500 (82,700-248,000 baht) for PHEV and BEV buyers, based on the size of the battery. Some states also provided add-on tax rebates.
Japan's Ministry of Economy, Trade and Industry (Meti) said its government introduced an auto tax reduction of 20% for HEVs and 75% for PHEVs and BEVs, adding a subsidy of 200,000 yen (59,800 baht) to create more demand.
Satoshi Nishino, Meti director of automotive international trade policy, said the biggest concern in driving EV ownership is the higher price tag compared with ICE cars, citing a 30% gap for HEVs and double the price for BEVs in Japan.
Other factors limiting EV ownership are the short driving range of the vehicle because of the battery and the need to develop charging infrastructure.
"Generating new EV demand and developing charging infrastructure should be done in parallel," he said. "Thailand's long-term plan is to install 690 charging stations to be available by 2036, which I think is modest."
ADJUSTING TO CHANGE
Thanks to several Board of Investment (BoI) incentives, most of the Thai auto parts producers agreed they need time to adjust to HEV manufacturing before completely changing to produce pure EV.
This is a major adjustment for auto parts workers as EVs require very few auto parts compared with ICE vehicles.
Achana Limpaitoon, president of the Thai Auto Parts Manufacturers Association (Tapma), said after the association sees the BoI's promotional privileges for EVs, most auto parts makers can handle any transformation from ICE vehicles because the government is providing time for the switch and supporting HEVs at the initial stage.
"HEVs are a good starting point for Thai auto parts makers because these vehicles are a combination of engines and electricity. Further development to PHEVs and BEVs requires new knowledge and local parts makers will need to study the technology," she said.
Mrs Achana said the local parts supply chain was developed along with Thailand's automotive industry for almost six decades. Local parts suppliers produce more than 80% of parts for passenger cars and pickup trucks made in Thailand.
However, she said Thai auto parts producers can adjust to match EV production with government support, particularly BoI incentives to encourage production of HEV parts in the first stage.
There are 800 Tier 1 parts firms and 1,700 firms for both Tier 2 and Tier 3, serving 18 carmakers in Thailand. These auto parts companies employ more than 700,000 workers, said Mrs Achana.
The supply chain combines to produce a total automotive output of 2.85 million vehicles a year in Thailand.
Advanced EV technology will affect the auto parts sector in the long run, particularly Tier 2 and Tier 3 companies that make engines, moulds, exhaust pipes, transmissions and brakes, she said.
EVs only have 18 parts per unit, but ICE cars typically have more than 2,000 parts, said Mrs Achana.
The smaller number of parts could mean a cut in the labour force, leading Thai auto parts makers to switch to producing parts for other sectors such as medical equipment and aircraft.
"Auto parts makers have to be prepared for advanced technology, and Tapma is advising our members to consider supplying parts to other potential businesses," she said.